Vous êtes sur la page 1sur 20

INTRODUCTION

Carrying on business activities entails many issues, one of which is parties


entering into various contracts which lay down terms and conditions. Although,
generally, efforts are made for unhindered implementation of the contracts, it may so
happen that, in their performance, disputes arise which the existing stipulations cant
take into account. In fact it is not humanly possible to provide for all eventualities which
can give rise to disputes and lay down ways and means to avoid them. Therefore a
mechanism has to be in place which will help in amicable settlement of altercation.
hile knocking at the doors of the courts for !ustice is pervasive, the delays and the
costs involved in court process cannot be wished away. Alternative machinery, which is
expeditious, offers swifter and less formal procedure as compared to courts, flexible and
which is also cost effective with legal backing, was always in demand. And this
machinery is Arbitration. It simply means out of court settlement of disputes through a
third party who is non"partisan and picked by the parties themselves. In the eventuality
of the parties not reaching a conclusion as to the arbitrators themselves there are
provisions to allow any other neutral body such as the court to appoint the arbitrator.
This process is well"accepted throughout the world. In the Indian context, the Arbitration
Act #$%& was in the statute book for long but with globali'ation of the Indian (conomy,
it has given way to The Arbitration and Conciliation Act, #$$) which has made the law
of arbitration in line with the global law.
This is an attempt to study the provision which allows the Chief *ustice or any person
or institution delegated by him to appoint the arbitrator. Infact as far as this provision is
concerned the Indian law is not a replication of the model law or any of the legal
systems. This has been done keeping in mind the new globalised scenario and the
ob!ective of minimal court interference.
+owever there have been various problems faced with the working of this
provision. The debate regarding the nature and scope of the provision has been
addressed by many. ,arious forums have expressed divergent views. The !udiciary has
been oscillating between this being an administrative or !udicial power as the
#
conse-uences regarding the right to appeal would depend on that. .urther even the
power to look into preliminary -uestions by the appointing body in spite of a specific
provision in the Act giving the arbitrator the power to do the same has been debated in
the same context.
,arious forums to suit their own interests are complicating the process of arbitration.
+owever what must not be forgotten under any circumstances is the general scheme of
the Act. The ob!ective of the Act is to provide speedy and cost effective dispute
resolution and hence build confidence in the Indian dispute settlement mechanism.


/
LEGAL LANDSCAPE
The scheme for appointment of the arbitrator in clearly explained in section ## of
the Arbitration and Conciliation Act, #$$). 0ection ## gives the parties the freedom to
agree on a procedure to appoint an arbitrator. It envisages a situation where failing an
agreement in arbitration with three arbitrators, each party shall appoint one arbitrator and
the two appointed arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall appoint the third who shall act as the presiding arbitrator
#
. .urther
1a2 If a party fails to appoint an arbitrator within 3& days from the receipt of a re-uest to
do so from the other party4 or
1b2 The two appointed arbitrators fail to agree on the third arbitrator within thirty days
from the date of their appointment4
The appointment shall be made upon re-uest by the Chief *ustice or any person or
institution designated by him
/
. The same is the provision in the case of a sole arbitrator
as well.
3
The power of the chief !ustice to appoint an arbitrator has also been clearly stated in
sec ##. 0ection ##1)2 here, under an appointment procedure agreed upon by the
parties"
1a2 a party fails to act as re-uired under that procedure4 or
1b2 the parties, or the two appointed arbitrators, fail to reach an agreement expected of
them under that procedure4 or
1c2 or a person including an institution, fails to perform any function entrusted to him or
it under that procedure4
A party may re-uest the Chief *ustice or any person or institution designated by him to
take necessary measure, unless the agreement on the appointment procedure provides
other means for securing appointment
%
.
+ence these sections together clearly lay out the scheme for appointment of the
arbitrators and the various situations in which the Chief *ustice or any institution
#
Section 11 (3), Arbitration and Conciliation Act, 1996.
/
Section 11 (4), Arbitration and Conciliation Act, 1996.
3
Section 11 (5), Arbitration and Conciliation Act, 1996.
%
Section 11 (6), Arbitration and Conciliation Act, 1996.
3
designated by him may be approached for the appointment of the arbitrator. .urther the
#$$) is a comprehensive code of arbitration. In order to understand the scheme of the
Act it is important to study some other relevant provisions as well. According to section
5 of the Act 6no !udicial authority shall intervene except where so provided in this part
5
.
The Act envisages a difference in referring the parties to arbitration under the 7ew 8ork
9ules and for domestic arbitration. This is clear from a cursory study of the 0ection :
)
and 0ection %5
;
. The difference between the two sections is apparent while section :
states that the !udicial authority shall refer the parties to arbitration and section %5 gives
the !udicial authority the discretion to refer the parties to arbitration unless it finds that
the said agreement is null and void and inoperative. 0o the difference in procedure as in
the case of enforcement of foreign awards and domestic arbitration are apparent. +ence
in the opinion of the researcher since the two are clearly worded differently the
difference in the two situations is apparent. 0o if a general overview of the #$$) Act is
conducted it will be seen that the Act is a Code envisaging minimum intervention by the
court as it clear by a reading of 0ection 5 of the Act and all situations where an appeal
can be made against an order of the arbitral tribunal have been clearly stated in section
3; of the Act.
:
. 0ince the Act covers the situations where an appeal would be possible it
clearly excludes all other possibilities.
5
Section 5- notwithstanding anything contained in any other law or the ti!e being in orce, or !atters
go"erned by this #art, no $%dicial a%thority shall inter"ene e&ce#t where so #ro"ided in this #art.
)
Section ' (ower to reer #arties to arbitration where there is an arbitration agree!ent
(1) A $%dicial a%thority beore which an action is bro%ght in a !atter which is the s%b$ect o an arbitration
agree!ent shall, i the #arty so a##lies not later than when s%b!itting his irst state!ent on the s%bstance
o the dis#%te reer the #arties to arbitration.
;
(ower o $%dicial a%thorities to reer #arty to arbitration
notwithstanding anything contained in (art ) or in the Code o Ci"il (roced%re, a $%dicial a%thority
when sei*ed o an action in a !atter in res#ect o which the #arties ha"e !ade an agree!ent reerred to in
Section 44, shall, at the re+%est o one o the #arties or any #erson clai!ing thro%gh or %nder hi!, reer
the #arties to arbitration, %nless it inds that the said agree!ent is n%ll and "oid, ino#erati"e and
inca#able o being #eror!ed.
:
Section 3, A##ealable -rders
(1) an a##eal shall lie ro! the ollowing order ( and no others) to the co%rt a%thori*ed by law to hear
a##eals ro! original decrees o the co%rt #assing the order na!ely-
(a) .ranting or re%sing to grant any !eas%re %nder section 9.
(b) Setting aside or re%sing to set aside an arbitral award %nder section 34.
(/) a##eal shall also lie to a co%rt ro! an order o the arbitral trib%nal-
(a) acce#ting the #lea reerred to in s%b section / or s%b section 3 o section 160 or
(b) granting or re%sing to grant an interi! !eas%re %nder section 1,
(3) no second a##eal shall lie ro! an order #assed in a##eal %nder this section, b%t nothing in this
section shall aect or ta1e away an right to a##eal to the S%#re!e Co%rt.
%
After these sections it would be easy to come to the conclusion that the #$$) Act
provides greater autonomy to the parties and has reduced !udicial interference. The Act
is based on the <odel law by the =nited 7ations Commission for International Trade
>aw 1=7CIT9A>2 of which India is a member and meets the specific need for
international commercial arbitration. The important feature of the =7CIT9A> model
rules and law is that they have harmoni'ed concepts on arbitration and conciliation of
different legal systems of the world and thus contain provisions designed for universal
application. The new Act has been instrumental in attracting foreign investors and
making them feel secure in the environment of efficient and speedy !ustice
$
.
+owever the provisions of section must be examined in the light of these ob!ectives
of the Arbitration and Conciliation Act, #$$). This provision differs from the model law
and also from the law of most of the other countries. The model law in Art ##1%2
contemplates the appointment of arbitrators by 6Court or other Authority specified in Art
) mandates that 6the functions referred to in Art ##1%2 shall be performed by 1each state
enacting this model law specifies the court, courts or where referred to therein, other
authority competent to perform these functions
#&
.thus it must be observed that the
0ection ## of the Indian Act is not a replication of the model =7CIT9A> model. Infact
keeping the ob!ective of minimal court interference in mind 0ection ## of the Indian Act
is probably more progressive than the model law as has been stated by ?r. @erold
+ermann a principal drafter of the model law.
##

+ence the ob!ectives of the #$$) act are clear and are reflected in almost all the
provisions of the Act. The main ob!ective being speedy !ustice and minimal intervention
of the courts section ## facilitates such an ob!ective as the chief !ustice as an officer is
given the power to appoint or arbitrator or designates any institution to do the same. 0o
the parties do not have to go through the courts for the appointment of the arbitrator and
it can be done in a speedy fashion.
Aefore concluding the examination of legal landscape as regards the power of the
Chief *ustice to appoint an arbitrator and the general scheme of the Act it is important to
$
2.. Singhania, 3Co!#arati"e St%dy o the )ndian Arbitration Act 1944 and the Arbitration and
Conciliation Act 19963, Arbitration and A56, 7ol. 3, 8o /, -ctober 199'.
#&
Cons%ltation (a#er on re"iew o 9or1ing o the Arbitration and Conciliation Act, 1996, :aw
Co!!ission o )ndia.
##
5r .erold ;er!ann, at the <7 )CCA Congress held at 8ew 5elhi, =arch /-4, /444.
5
observe the change that has been seen after #$%& Act.0ection : of the #$%& Act
corresponds to section ## of the #$$) Act
#/
.0o the old Act talks about the court
appointing the arbitrator which is similar to the provision of the model law. +owever the
#$$) Act clearly deviates from that principle and gives the Chief *ustice or any
institution designated by him to appoint the arbitrator. This could be understood in the
context of the liberali'ation policy of the government of India to integrate the Indian
economy with the world economy and the subse-uent increase in the international sale
of goods and services, investment, communication and transportation. In order to keep
pace with the disputes that would arise from these activities, India had to streamline its
arbitral mechanism. +ence the ultimate goal is to provide a -uick and cost effective
remedy as any other law in the world. In the case of section ## the drafters went a step
ahead of the model law and envisaged a situation where court intervention would be
minimal and the Chief *ustice or any institution designated by him will have the power
to appoint an arbitrator.
#/
Section ' o the Arbitration Act 1944 states that
(ower o the Co%rt to A##oint arbitrator or %!#ire-(1) in any o the ollowing cases>-
(a) where an arbitration agree!ent #ro"ides that the reerence shall be to one or !ore arbitrators to be
a##ointed by consent o the #arties, and all the #arties do not ater dierences ha"e arisen, conc%r in
the a##oint!ent or a##oint!ents0 or
(b) i any a##ointed arbitrator neglects or re%ses to act, or is inca#able o acting, or dies, and the
arbitration agree!ent does not show that that it was intended that the "acancy sho%ld not be
s%##lied, and the #arties or the arbitrator, as the case !ay be, do not s%##ly the "acancy0 or
(c) where the #arties or the arbitrators are re+%ired to a##oint an %!#ire and not a##oint hi!,
any #arty !ay ser"e the other #arties or arbitrators as the case !ay be, with a written notice to conc%r in
the a##oint!ent or a##oint!ents or in s%##lying the "acancy
(/) ) the a##oint!ent is not !ade within 15 clear days ater the ser"ice o the said notice, the co%rt
!ay, on the a##lication o the #arty who ga"e the notice and ater gi"ing the other #arties an o##ort%nity
o being heard, a##oint an arbitrator or arbitrators or %!#ire, as the case !ay be who shall ha"e li1e
#ower to act in the reerence and to !a1e an award as i he or they had been a##ointed by consent o all
#arties.
)
DISCRETION OF THE COURT
+aving examined the legal provisions regarding the power of the Chief *ustice
to appoint the arbitrator it is important to observe the factual situation as well. The
important -uestion that needs to be considered is whether the Chief *ustice or any
institution designated by him also has the power to go into preliminary -uestions before
the appointment of the arbitrator. As far as the legal provisions are concerned it was
been clearly seen that there is a difference between the domestic and foreign arbitration
procedures. In the case of sec 35 the court has the power to see whether the agreement is
null inoperative or void before appointing an arbitrator. +owever in the case of section :
no such provision is given. (ven under the #$%& Act the Court had the power to refuse
the appointment of an arbitrator if there was no arbitration clause in existence. In the
case of 5ayanand 6eddy v. A.( )nd%strial )nrastr%ct%re Cor#oration
13
it was held by
the courts that the original agreement signed by the parties did not contain any clause for
arbitration. It was further held that in the absence of clear intention of the parties
agreement for arbitration cannot and should not be inferred more so when the specific
case of the respondent is that by mistake the clause relating to arbitration crept in the
copy of the agreement. .urther also in the case of ?harat ?h%shan v. @( S!all
)nd%stries Cor#oration :td.
#%
a contractor made an application under section : of the
#$%& Act for the appointment of an independent arbitrator. Application was allowed by
the civil !udge an in appeal the +igh Court held that the court had no !urisdiction under
section : of the #$%& Act to appoint an arbitrator because in the circumstances of the
case none of the clauses of section : were attracted. +owever the 0upreme Court in turn
upheld the decision of the +igh Court but the for different reasons. They held that the
disputed agreement did not contemplate any arbitration the application under section :
was misconceived.
+owever the situation under the #$$) Act should be different as the Act only says
that in certain cases the chief *ustice or any institution designated by him shall appoint
an arbitrator under some given circumstances. +owever there has been varied opinion
#3
5ayanand 6eddy ". A.( )nd%strial )nrastr%ct%re Cor#oration, (1993) 3 SCC 13,.
#%
?harat ?h%shan ". @( S!all )nd%stries Cor#oration :td., (1999) / SCC 166.
;
and debate on that issue. 0ome +igh Courts have taken the view that before taking
necessary measures for securing appointment of the arbitrator or arbitrators under
section ## the Chief *ustice or his designate can go into the -uestion of existence or
validity of the arbitration agreement and the arbitrality of the sub!ect matter of the
dispute in arbitration. In the case of :acha!anna ? ;ora!ani v. State o 2arnata1a
15
the !udge went into the issue of whether there was a valid clause referring the parties to
arbitration and then the !udge decided to appoint Chief (ngineer as the sole arbitrator.
Also in the case o :loyds Steel )nd%stries :i!ited ". -il and 8at%ral gas Cor#. :td
16
.
There was a contract with an arbitration clause. The applicant6s bill involving huge
amounts was with held for about % #B/ years and the applicant suffered great loss. The
applicant agreed to enter into a memorandum of understanding and so the original claim
between them was settled. +owever there was a dispute regarding interest for delayed
payment. The contention was that the memorandum of association had put an end to the
original agreement so the arbitration clause in that could not be invoked. +owever the
counsel for the applicant contended that the appointment of the arbitrator was mandatory
and it was for the arbitral tribunal to rule on its own !urisdiction, including any ob!ection
as to the validity or existence of the arbitration agreement. The court disregarded this
contention and said that even if the arbitral tribunal is re-uired to decide the said
-uestion under section #) of the Act, still however before referring the matter for
arbitration, arbitration agreement must be in existence without the arbitration agreement
there would be no -uestion of referring the matter for arbitration.
+owever there have been various courts that have also given decisions to the
contrary. In the case of 8%con )ndia (() :td. v. 5elhi 7idy%t ?oard (5es%)
1,
It was an
application for the appointment of an arbitrator under 0ection ## of the Arbitration and
Conciliation Act, #$$) for ad!udicating the dispute having arisen between the petitioners
and the respondents relating to the execution of the contract awarded by the respondents
for the work of construction of control room building for %&& C, 0ub"0tation of the
respondent 1?(0=2 at Aawana, ?elhi. The letter of intent was issued by the respondents
on )th August, #$$#. The contract was for 9s. #,#&,&/,:)&. Time was the essence of the
#5
:acha!anna ? ;ora!ani v. State o 2arnata1a, #$$$ 1#2 Arb. >9 #53.
#)
:loyds Steel )nd%stries :i!ited v. -il and 8at%ral gas Cor#. :td., AI9 #$$; Aom 33;.
#;
8%con )ndia (() :td. v. 5elhi 7idy%t ?oard (5es%), /&&# 1/2 Arb >9 #35.
:
contract and it was to be completed within a time period of six months, that is, by :th
*une, #$$/. According to the petitioners, the contract could not be completed for various
reasons attributable to the respondents. The fact that there was an arbitration clause was
not disputed. hen the respondents failed either to make the payment of the claim
amount or to appoint an Arbitrator in terms of the arbitration clause as demanded by the
petitioners, the petitioners were left with no other alternative but to file the present
petition under 0ection ##1)2 of the Act. >earned counsel for the respondents claim that
they did appoint a sole arbitrator as per the arbitration clause and sent a notice to the
petitioner and so the petitioners claim under section ## will become infructuaous.
+owever the petitioners claim that the appointment was made after the application was
made under the section and even after repeated re-uests the petitioner did not do the
same before the application was filed under sec ##1)2. The court held that f the other
party fails to appoint an arbitrator within 3& days after the receipt of notice to do the
court is chief *ustice is obligated to do so without going into the any other -uestions of
!urisdiction. Also in the case of =eda 8arisi!h%l% v. Co%ncil o Scientiic and
)nd%strial 6esearch and another
1'
the !udge held that 6the -uestion of limitation however
debatable it is, should first be decided by the Chief *ustice or a person designated by him
before a decision is taken on the appointment of the arbitrator. Therefore i see no bar to
appoint an arbitrator under section ##1)2 read with other allied provisions inasmuch as
the respondent failed to respond to the applicants re-uest for the appointment of the
arbitrator in terms of the agreement and the agreement does contain arbitration clause for
the appointment of the sole arbitrator. .urther there are certain larger -uestions that may
arise in the context of section ##" the nature and amplitude of the power conferred on the
Chief *ustice or the person designated by him4 whether the chief !ustice is re-uired to
pass a !udicial order if there is a controversy with regard to arbitrality of the claims. It
can be safely said that the !urisdiction conferred on the C* or the person designated by
him under section ##1%2 and ##1)2 does not comprehend the power to decide arbitrable
and arguable -uestions which could otherwise be decided by the arbitrator. Therefore
there is no bar to appoint an arbitrator under ## 1)2 inasmuch as the respondent failed to
#:
=eda 8arisi!h%l% v. Co%ncil o Scientiic and )nd%strial 6esearch and another, #$$$ 10uppl2 Arb >9
)%:.
$
respond to the applicant6s re-uest for appointment of an arbitrator as per the terms of the
agreement.
+ence all the cases clearly show that there is a divergence of !udicial opinion on
the -uestion of whether the chief !ustice or designated authority can go into preliminary
issues regarding !urisdiction inspite of the fact that section #) clearly says that the
arbitrators have the power to ad!udicate matter regarding their own !urisdiction.
This -uestion that has been widely debated recently. The >aw Commission of
India has also gone into the -uestion and conducted the study. According to the report of
the law commission it is true that section #) of the arbitration Act, #$$) confers power
on the arbitrators to decide various !urisdictional issues. Dne view is that even
!urisdictional issues raised in section ## stages should be decided only by arbitrators and
not by courts. They further clarify that it is the first time that such a specific power is
given to the arbitrator under the new Act. According to the law commission6s
understanding of section #).It appears that the intention behind 0ection #)1#2 is that such
a power to decide !urisdictional issues should be exercised by the arbitrators whenever
disputes go before them on being referred by the parties. if the matter straightway goes
before the arbitrators i.e. not by reference under section ##, the arbitrators can certainly
decide the !urisdictional issues and the decision on the said issues would always be
amenable to review under section 3% of the Act if the present position continues under
section ## the arbitrators would decide -uestions of !urisdiction and if they accept the
plea of lack of !urisdiction, their order would be amenable to appeal under section 3; 1/2
1a2. If however they re!ect the said plea, there is no provision for appeal and the party has
to wait till the award is passed. +ence in the opinion of the >aw Commission the courts
should have the power to go into issues of !urisdiction and when a party contends that
there is no arbitration agreement -uestions of fact are raised. In such an event a
provision can be made under section ## that the court may have the evidence recorded
by an advocate commissioner appointed by it.
In the opinion if the researcher the law commissions understanding should be
sub!ect to criticism as it is apparent that the main ob!ective of the #$$) Act is speedy
!ustice. hen the Act specifically confers power under section #) on the arbitrator to go
into -uestions regarding !urisdiction the appointing authority should not have the right to
#&
consider -uestions of !urisdiction. The Chief *ustice or any designate is only re-uired to
appoint an arbitrator in the eventuality that there is disagreement between the parties or
deadlock. This is so that an impartial authority may be able to appoint an arbitrator in the
event of a dispute between the parties. +ence the function of the court or the designate
should be restricted to the appointment alone and not to go into the -uestions of
!urisdiction.
##
NATURE OF THE POWER
An extremely important provision that has arisen in the context of the power of the
chief !ustice to appoint the arbitrator is what the nature of the power is. There has been a
wide controversy regarding this issue and various !udicial opinions have been given. The
provisions of section ## repose the statutory power in the Chief *ustice or his designate
in cases where parties fail to agree with respect to the procedure or appointment of the
arbitrators. ?espite the clear and unambiguous language of the statute, both confusion
and conflict have arisen on the -uestion of whether the statutory functions of the Chief
*ustice or his designate are acting under section ## are of administrative or !udicial
characterE
#$

It would be important to understand the scope of the terms administrative and !udicial.
The term administrative though bearing a wide range of meanings may be taken as
referring to 6broad areas of government activity in which repositories of power may
exercise every class of statutory function. A !udicial decision on the other hand
presupposes an existing dispute between two or more parties and involves the
presentation of their case by the parties to the dispute4 ascertainment of facts by means
of evidence adduced by the parties4 submission of legal arguments4 decision which
disposes of the whole matter by a finding on disputed facts and an application of law
when necessary, and a ruling on any disputed -uestions of law
/&
.
+ence now the nature of the power given to the Chief *ustice or his delegate may
be examined. The -uestion of whether the court has the power to go into the preliminary
-uestion of the arbitrality of the dispute would also be answered if the power was held to
be !udicial or administrative. In the case of 2.6 6a"eendranath v. State o 2erela
/#
referred the -uestion as to whether the 0upreme Court or his designate acting under
section ## to appoint an arbitrator could decide the -uestions of existence and validity of
the agreement to a larger bench. .ollowing this decision a two"!udge bench in the case of
#$
-.( =alhotra, Ahe Arbitration and Conciliation Act, 1996 (%nder #%blication by ?%tterworths, 8ew
5elhi).
/&
BA. .riith et al, (rinci#les o Ad!inistrati"e :aw (4th ed., :ondon> (it!an (%blishing, 196,) at 143.
/#
2.6 6a"eendranath ". State o 2erela, (1996) 14 SCC 35.
#/
)C)C) :td. v. Cast Coast ?oat ?%ilders D Cngineers :td.
//
. Also referred the matter to a
larger bench for consideration. In the case o S%ndara! Einance :td. v. 8C(C )ndia
:td.
/3
the court stated that the appointment of an arbitrator under section ## does not
re-uire a court to pass a !udicial order. This opinion was reaffirmed in the case of Ador
Sa!ia ("t. :td. v. (ee1ay ;oldings :td.
/%
here the court held that orders under section
## of the Act are not !udicial orders. It went on to say that as the learned Chief *ustice or
his designate under section ## 1)2 of the Act acts in administrative capacity. It is obvious
that such order cannot be passed by any court exercising !udicial function nor is a
tribunal having the trappings of a !udicial authority.
9ecently in the case of 9ellington Associates :td v. 2irit =ehta
/5
acting as a
designate of the Chief *ustice of India in an International Commercial Arbitration
*agannadha 9ao * had assumed full !udicial powers. In this case he held that the
!urisdiction of the C*I or his designate to decided -uestion is not excluded by 0ection #)
of the Act. .urther he held that arbitration clause was an enabling provision only having
no mandatory sense and thus no reference could be made to an Arbitral tribunal. +e
stated that even if the Chief *ustice of India or his designate is to be treated as an
administrative authority, the position is that when the said authority is approached
seeking appointment of an arbitrator or an arbitral tribunal and a -uestion is raised that
there is to start with, no arbitration clause the C*I or his designate would have to decide
the -uestion. hat must be noted here is that *agannadha 9ao * was the same !udge who
had deemed it appropriate to refer the matter to a larger bench in the earlier case of
ICICI >td.
Another important case in this regard is that of 2on1an 6ailway Cor#orations :td. v.
=Fs =eh%l Constr%ction Co.
/)
, in this case it was stated that if it was held that the order
under section ##1)2 is a !udicial or -uasi !udicial order then the said order would be
amenable for !udicial intervention. And any reluctant party may frustrate the entire
purpose by adopting dilatory tactics in approaching a court of law even against an order
of appointment of an arbitrator. 0uch an interpretation has to be avoided in order to
//
)C)C) :td. ". Cast Coast ?oat ?%ilders D Cngineers :td, (199') 9 SCC ,/'.
/3
S%ndara! Einance :td. ". 8C(C )ndia :td., (1999) / SCC 4,9.
/%
Ador Sa!ia ("t. :td. ". (ee1ay ;oldings :td., (199') ' SCC 5,/.
/5
9ellington Associates :td ". 2irit =ehta, (/444) 4 SCC /,/.
/)
2on1an 6ailway Cor#orations :td. ". =Fs =eh%l Constr%ction Co, (/444) 3 SCCB /65.
#3
achieve the basic ob!ective for which the country has enacted the #$$) Act. If on the
other hand it is held that the order passed in administrative in nature then in such a case
when the C* or his designate refuses erroneously to make an appointment then an
intervention could be possible by the court. It would be a case of non"performance of the
duty of the chief !ustice or his designate and then a writ of mandamus would lie. The
nature and function of the Chief *ustice being essentially to aid the construction of the
arbitral tribunal the legislature consciously chose to confer the power on the chief !ustice
and not the court. +ence the power is an administrative power and not a !udicial power.
This court clearly went into the details of the function of the Chief *ustice and his
designate and came to the conclusion that it is an administrative power.
+owever a contrary view has also been held in the case of 2on2an 6ailway
Cor#oration :td. v. 6ani Constr%ction ("t. :td.
/;
In this case it has been pointed out that
there could be a variety of situations where preliminary issues arising at the stage of
0ection ## would have to be decide by the chief !ustice or his nominee, by a !udicial
order and this would save time and expenditure and this view is not inconsistent with the
=7CIT9A> model. It was held that if the order is treated as an administrative order it
could be challenged before a single bench of the +igh Court, the by a ?ivision Aench
and finally under Art #3) to the 0upreme Court. Dn the other hand in the case of a
!udicial order there would be a direct appeal to the 0upreme Court under Art #3). The
bench referred to the case of A*o" Shi##ing Co. v. ?altic Shi##ing Co.
/:
where the
-uestion of !urisdiction was first decided by the arbitrator and then came up before the
court. The court observed that this was perhaps a case where the parties could have
straightway come first before the court for determination of this issue, as that would
have saved costs and time. +ence the court held that the power was a !udicial power and
holding so would be in the interests of !ustice and in keeping with the ob!ectives of the
Act.
+ence clear divergence of opinion can be seen as regards the issue. There are two main
views regarding the nature of the power. Feople who contest that the power is an
administrative power state the reasons for it thus,
/;
2on2an 6ailway Cor#oration :td. ". 6ani Constr%ction ("t. :td, /444 (3) Arb :6 435.
/:
A*o" Shi##ing Co. ". ?altic Shi##ing Co, 1999 (1) ::.:6 6'.
#%
1#2 The chief !ustice is a repository of the statutory power, to make the necessary
measure for securing the appointment of the arbitrator or arbitrators.
1/2 The !udicial function broadly speaking presupposes an existing dispute between two
or more parties. The re-uest to take the necessary measure for securing appointment
of the arbitrator is not resolving any dispute relating to the existence or validity of
the arbitral agreement.
132 The functions discharged by the C* or a designate are administrative in character.
*ust because it is a !udge who has been vested with the power does not make it a
!udicial function.
1%2 This function of the Chief *ustice is analogous to the power given to the Chief
*ustice under Art #%) for appointment of officers and servants and the expenses of
the 0upreme Court. This is clearly an administrative power even though it is
discharged by the Chief *ustice.
152 The function of the Chief *ustice under section ## are exercisable by himself or 6any6
other person or institution designated by him. The use of the word 6any would
indicate that the power could be delegated to a non"!udicial functionary also.
1)2 As a rule !udicial functions cannot be delegated. If this were a !udicial function then
they could not have been designated to any person or institution that the court Chief
*ustice thinks fit.
These are the reasons presented by the proponents of the administrative nature of the
power. The researcher agrees with the view that the power is not a !udicial power. <ost
of the views given above clearly indicate that the nature of the power is not one of
ad!udicating on a dispute.
Dn the other hand the law commission of India clearly believes that power is meant to
be a !udicial power and that there should be an amendment to the section changing the
words 6Chief *ustice or any person or institution designated by him6 to 6the court6 taking it
back to the provision as it stood in the #$%& model. According to them any -uestion of
!urisdiction decided by the 0upreme Court would be binding under Art #%# and will be a
final order without giving scope for further litigation. If the !urisdiction issue is decided
by a bench of the +igh Court in domestic arbitration cases then only one appeal would
lie to the 0upreme Court. This would save time and expense in their opinion. .urther
#5
they have suggested that applications may be placed before the concerned bench of the
0upreme Court or the +igh Court, as original applications, without mixing them up with
other arbitration cases so that they might get top priority.
Another point of view presented from a practical point of view is that there can be
two situations. If the arbitrator is appointed then the parties are bound to proceed with
the arbitration and no appeal lies in terms of the express provision of section 3;. Dnce
the courts appoint an arbitrator the arbitral tribunal is constituted pursuant to the courts
orders. Any challenge to the !urisdiction had to be made before the arbitral tribunal
pursuant to section #). 0ection #) 1)2 says that any party aggrieved by such an award
may make an application for setting aside the award under section 3%
/$
.
Dn the other hand if the court turns down the re-uest then there is no arbitral tribunal
to raise their disputes. 0o under section 3; a 0pecial >eave Fetition would be possible.
+ence where the Chief *ustice appoints the arbitrator the decision is clearly
administrative and no appeal lies. +owever when the Chief *ustice turns down the
re-uest for such appointment the decision examines the facts and circumstances of the
case and decides the rights and liabilities of the parties and so is clearly !udicial in
nature.
Another view that could be examined in the opinion of the researcher is that this is
not a power given to the Chief !ustice at all but a function that he must perform himself
or through a designated body. It is basically the performance of a legal duty where no
element of choice enters. 7othing in section ## suggests that the Chief *ustice or any
person or institution designated by him has a choice in the matter of deciding whether to
appoint an arbitrator or not. It is a function that he must perform as per the re-uest of the
parties. in which case the whole debate regarding administrative or !udicial power would
be of no conse-uence as it is !ust a power to a public functionary which he must perform
in the course of his duty. The fact that there is no choice in the matter of appointment
can also be seen from the difference between section : and ## as compared to section %5.
In section %5 there is a clear element of choice available to the court. If the court feels
that the agreement is null and void it has the power not to refer the parties for arbitration.
/$
6anbir 2rishnan, 3 A##oint!ent o Arbitrator by Co%rt %nder the )ndian Arbitration and Conciliation
Act, 1996G, )nternational Arbitration :aw 6e#orter, 7ol. 3. (:ondon> Sweet and =a&well, /444) at 3,.
#)
+owever in the case of domestic arbitration there is no such element of choice as per the
Act.
+ence there are various divergent views available in this regard. The 0upreme Court
still has to give a large bench decision upon the matter. The >aw Commission has made
suggestions to amend the act and make it a clearly !udicial power. ,arious practitioners
have also followed the middle path. +ence in the opinion of the researcher in this whole
debate the party6s interest should not be forgotten and the ob!ect and scheme of the Act
to attain speedy and inexpensive disposal to the suit should not be forgotten.
#;
PRACTICE
Any law in practice is hardly ever what i is envisaged to be by the Act. +owever it
is necessary to remember the goals of the Act and not let practical manifestations take
over the legislatures intent completely. It has been said that the issue of whether the
power of the Chief *ustice is administrative or !udicial and the issue of whether the Chief
*ustice has the power authority to decide disputed cases apart from appointing the
arbitrator has now been complicated beyond comprehension. 0everal appointments are
held up in the meanwhile
3&
.
Another aspect that needs to be looked into while examining the actual practice of
section ## is the exercise of the power given to the Chief *ustice to either appoint the
arbitrator himself or through an institution or person designated by him. An examination
of the cases where the chief !ustice has used his power to appoint an arbitrator it has
most often been a retired *udge or an advocate
3#
. The serious concern here is the lack of
institutional arbitration in the country. +owever this could be explained on the terms
that ad hoc arbitration is preferred because of speed and the grounds of expense
3/
.
Another reason could be the tendency of the !udiciary to keep the power concentrated in
it6s own hands. There could be various reasons for the same. +owever both international
and domestic arbitration needs to grow as it provides an effective method off dispute
settlement. +owever the attitudes of the practitioners and the courts will have to change
and the growth of the arbitration will have to be allowed unhindered.
3&
=B Antony, 3:itigants wee#, lawyers la%gh3, ?%siness Standard, /5
th
B%ly, /441.
3#
=eena1shi 5e"i ". =SAC :td., /444 (S%##l) Arb :6 3940 A$it (rasad Bain ". @nion o )ndia, /444
(S%##l) Arb :6 461.
3/
;enry B ?rown, A56 (rinci#les and (ractice ( :ondon> Sweet and =a&well, 199') at 115.
#:
CONCLUSION
This was an attempt to study the powers of the Chief *ustice to appoint an arbitrator.
=nder the Arbitration and Conciliation Act #$$), the parties are free to decide the
procedure for appointment of the arbitrators. +owever if there is a deadlock or a conflict
some neutral body is re-uired to appoint the arbitrator to ad!udicate upon the dispute.
This power under the Indian Act is given to the Chief *ustice or any person or institution
designated by him. This provision has to be understood in the context of general scheme
of the Act itself. The mail ob!ectives of the Act are to minimi'e court intervention and to
make arbitration a speedy and cost effective method of dispute resolution.
+ence in the opinion of the researcher the Chief *ustice being an independent
body has been entrusted with the function to appoint arbitrators. It is significant to note
that this provision of our Arbitration and Conciliation Act, #$$) is different from the
=7CIT9A> model and also from similar provisions in most other legal systems. This
would indicate that the drafting of our Act as regards is aspect is extremely progressive.
+owever various problems have emerged as regards the nature and scope of the
power conferred on the Chief *ustice through section ## of the #$$) Act. The moot
-uestion being whether the power given to him is administrative or !udicial and whether
the power took into !urisdictional issues is that of the arbitrator alone 1under section #)
of the #$$) Act2 or the Chief *ustice or his appointee even at the stage of appointment
has the power to examine -uestions of !urisdiction apart from !ust appointing the
arbitrator. In the opinion of the researcher the Act is a self contained code and so with
provisions fro minimum intervention of the court. +ence the Chief *ustice or his
designate should be restricted to the mere appointment of the arbitrator and not go into
!urisdictional -uestions as the Act clearly gives the arbitral tribunal the power decide
-uestions on it6s own !urisdiction. .urther appeal provisions have also been clearly stated
in the Act itself so debate about the conse-uences flowing from the !udicial or
administrative character of the should not be affecting the right to appeal of a party
sub!ecting itself to arbitration under the rules of the #$$) Act.
The entire controversy and debate has complicated the issue and makes the
process of arbitration seem very complicated. This however would be contrary to the
#$
intention of the Act. The legal practitioner today has made the process complicated and
court oriented to serve their own ends. This should be avoided at all lengths. The
primary goal of the Act to make the process of arbitration simple and cost effective
should not be forgotten as that is becoming increasingly important to promote
international sales and encourage foreign investors.
In the new globalised scenario increase of international sales should be of
paramount importance and making the process of dispute settlement simple and cost
effective if a ma!or incentive as it gives the foreign party the confidence to trade with
Indians. +ence this being the primary goal in view the intervention of courts should be
kept to a minimum and the process should be made simple and cost effective.
/&